LATAM says capacity growth tracking to lower end of guidance as fuel stays high 

By Kylie Madry

MEXICO CITY, Oct 20 (Reuters) - LATAM Airlines expects capacity growth this year to come in at the lower end of its forecast range after trimming some supply in response to high jet fuel prices, Chief Executive Roberto Alvo told Reuters on Tuesday, signaling a more cautious expansion path for Latin America's largest airline group.

LATAM said in August it expected 2026 capacity growth of 9% to 10% year over year, and adjusted core earnings of $4.1 billion to $4.4 billion. Alvo said the airline was still tracking within that range, but closer to the bottom end as elevated fuel prices forced some adjustments to planned flying.

"We have canceled a little more capacity because of high fuel prices," Alvo said in an interview on the sidelines of the Latin American & Caribbean Air Transport Association conference.

He said LATAM's model remained resilient because of strict cost controls and stronger premium revenue, even if the group, like other airlines, has been unable to pass through all of the jump in fuel costs to passengers.

Alvo said LATAM consumes about 36 million to 38 million barrels of jet fuel a year, meaning a $10-per-barrel move in prices translates into roughly a $370 million annual cost impact.

He said the assumptions behind the company's previous guidance already implied about $1.7 billion in additional fuel costs for the year, and that the hit had since grown somewhat as fourth-quarter prices remained above those assumptions.

Alvo said LATAM's push toward higher-yield premium traffic was a long-term strategy rather than a short-term response to the fuel shock, built on investments in cabins, lounges, onboard service, connectivity and broader customer experience.

He also said LATAM was interested in studying service to additional Mexican cities such as business hubs Guadalajara and Monterrey, although such routes would depend in part on aircraft availability.

Alvo said those opportunities could become more viable as LATAM starts receiving Airbus AIR.PA A321XLR jets from next year.